Immigration and Refugee Legal Aid Cost Drivers

2. Legal aid cost drivers - a general overview (cont'd)

2. Legal aid cost drivers - a general overview (cont'd)

2.5 Cost impact of different modes of delivering legal aid

Legal aid programs in Canada differ widely in the ways in which they provide legal aid services, and the portion of such services that are delivered by salaried staff lawyers and by lawyers in private practice. Salary rates and the tariff rates for different services also vary widely among the different legal aid plans. These differences are reflected in different unit costs (i.e. cost per case), which in turn drive overall program costs.

A number of studies, starting with a seminal study on criminal legal aid services in Burnaby (Brantingham, 1981), have noted a significant correlation between legal aid program costs and the way different legal aid plans pay lawyers for the services they provide. Findings from many of these studies are summarized in the overview, Patterns in Legal Aid, published by the federal Department of Justice (1995). There has been considerable controversy about the methodology used in many of these studies for calculating "unit costs" for case funded by legal aid plans (Sloan, 1987; Canadian Bar Association, 1987; Meredith, 1991; Meredith, 1994; Prince, 1991; Prince (Pristupa), 1994a; Prince (Pristupa), 1994b; Brantingham, Brantingham & Easton, 1993). However, the evidence, on balance, indicates that it generally costs less to deliver legal aid services through salaried lawyers than through lawyers who work on a fee for service basis (Goriely, 1997b: 189; Currie, 1996: 54-56).

Most legal aid programs in Canada currently utilize some sort of mixed model for service delivery, with some services being provided by salaried lawyers who are employed directly by the legal aid authority in the province, and other services being delivered by lawyers in private practice under a variety of different payment arrangements. This mixed approach is believed to offer the best opportunity to avail of the advantages of the different delivery options in different circumstances (Canadian Bar Association, 1987; Cramsie, 1996: 25-26; Currie, 2000). For example, it may be advantageous to utilize staff lawyers for specialized services in relation to certain poverty law issues and for duty counsel and initial advice services, and to utilize fee-for-service lawyers in private practice to deliver services in remote areas that do not have sufficient population to warrant the establishment of staff offices (Currie, 2000).

2.5.1 Delivery of legal aid services through salaried staff

The debate over legal aid costs in Canada has been dominated by the controversy over the relative merits of the judicare model, under which lawyers in private practice are paid for services rendered in accordance with an established tariff, and the staff model, where services are provided by salaried lawyers and supervised paralegals working directly for the legal aid authority. As noted above, a preponderance of evidence indicates that the staff model for service delivery is generally more cost-effective.

Evidence on relative cost effectiveness of the two models in the area of immigration and refugee legal aid is mixed. The Immigration and Refugee Law Clinic (IRLC) operated by the Legal Services Society in British Columbia is generally regarded as having performed effectively. However, there has been no systematic evaluation of its cost-effectiveness (Macklin, 1997: 1005; Social Policy and Research Council, 2002: 9). Wong- Rieger (1996) found that staff lawyers at the Refugee Law Office (RLO) in Toronto spent substantially more time on each case than did their counterparts in private practice. She found that the average cost per case handled by the RLO in its initial years of operation was about 70% higher than for cases handled by members of the private bar. This finding appears to be borne out in available data from Manitoba, which indicates that in 1998-99, the average cost for cases handled by members of the private bar ($591) was substantially lower than for cases handled by staff counsel ($960) [13]. The final report on the RLO evaluation (Wong-Rieger, 1998; Wong-Rieger, 2000) found that the differential in average cost per case, as between the RLO and the private bar, had diminished considerably from 1995-96 to 1995-97, but that the RLO cost was still more than 8% higher than the private bar cost. A subsequent supplemental report on cost efficiency of the RLO found that the higher cost per case at the RLO was related to the small number of cases handled by the RLO and the fact that the cases handled by the RLO tend to be more complex. By 1999-2000, when the caseload at the RLO had increased to an adequate level (280 cases), the average cost per case handled by the RLO was 4% less than for cases handled by the private bar (MacDonald, 2001: 9).

Comparisons of cost per case may be misleading since they do not take fully into account differences in complexity of cases handled by staff counsel and by private lawyers. Also, as noted by a representative from the IRLC in Vancouver, such comparisons also do not adequately account for time spent by staff lawyers providing additional services that are not covered under the tariff (Social Policy and Research Council, 2002: 9). On balance, it appears that the staff model is at least as cost-effective as the judicare model for providing legal aid to immigrants and refugee claimants, provided an adequate number of cases are referred to the staff offices.

There is also a debate as to which service delivery model produces the best quality of legal representation. Evidence on this issue is mixed. It is extremely difficult to assess the quality of services provided by lawyers to third party clients, and clients are generally ill-equipped to make such an assessment themselves (McCamus, Brenner, et al., 1997: 129-130). Some studies have found that salaried legal aid lawyers get equivalent results, but that they spend less time on each case (Department of Justice, Canada, 1995). Critics of the staff model interpret this to suggest that staff lawyers may be less vigorous than judicare lawyers are in pushing their clients' interests. However, the fact that the salaried staff lawyers achieve equivalent or better results for their clients suggests that this criticism is unfounded.

Goriely (1997a: 2) identifies a number of possible explanations why salaried lawyers spend less time per case. Staff lawyers may choose easier cases, though Goriely notes that the evidence does not support this conclusion. Staff lawyers may be more specialized. Staff offices may achieve economies of scale that enable them to provide better backup services. And salaried staff lawyers have an incentive to get through their caseload as quickly as possible, while lawyers who are paid for the time they spend on each case have an incentive to maximize the time worked.

Some of these observations about salaried lawyers are borne out in the context of immigration and refugee legal aid. Services provided by legal aid staff lawyers at refugee law clinics are widely recognized as being of high quality. Wong-Rieger (1996, 1998) found that RLO lawyers spend more time on individual cases than do their counterparts in private practice, This is directly contrary to the finding that salaried legal aid lawyers in the criminal law area tend to spend less time per case than lawyers in private practice [14]. She suggests that this accounts in part for lower productivity of RLO lawyers relative to lawyers in private practice.

The Immigration and Refugee Law Clinic (ILRC) in British Columbia is also recognized as providing high quality legal services, but it has not been subject to a cost-effectiveness evaluation similar to the one carried out by Wong-Rieger in Ontario. The ILRC and the RLO have developed considerable expertise in refugee law and with respect to conditions in the source countries from which refugee claimants come. Lawyers at these clinics are also supported by experienced paralegals. Paralegals at both the RLO and the IRLC play an important supporting role for lawyers. McCamus, et al. (1997: 210) note that the RLO expressly recruited lawyers who were among the most highly respected members of the private immigration bar.

A key issue for the private bar in the staff vs. judicare debate is the perception that staff delivery of legal services limits the right of legal aid clients to retain counsel of their choice. It is unclear whether this is as significant a factor with respect to immigration and refugee legal aid as it may be in other areas such as family law and criminal law. Immigrants and refugee claimants who are newly arrived in Canada, especially refugee claimants, have little basis on which to choose among different counsel. Most of them rely on references from friends or acquaintances, or from interpreters whom they have met shortly after arriving in Canada (Macklin, 1997: 1000, citing Wong-Rieger, 1996). Others rely on referrals from community service organizations. Very few of them have any prior knowledge of whom they want to represent them when they make their refugee claims. On the other hand, as a result of the experiences they have endured, many refugee claimants are highly distrustful of strangers, especially those whom they perceive as being in positions of authority. Therefore, claimants' ability to exercise some choice in selecting a representative may be important in establishing a level of trust between the claimants and those who represent them [15]. Endorsement of a particular representative by a relative or a trusted acquaintance may be essential to establishing confidence in the representative on the part of immigrant and refugee clients when they first arrive in Canada (Frecker, Duquette, et al., 2002).

Some lawyers have established strong links with particular immigrant communities and new arrivals in these communities are frequently referred to these lawyers. But there is no assurance that these lawyers are the ones best equipped to represent the persons concerned [16]. In fact, there is significant concern within the Bar and among NGOs about the quality of service provided by some immigration lawyers (Macklin, 1997: 992; Legistec, 2002). This concern is also shared by the IRB (Frecker, Duquette, et al., 2002) [17]. There are even greater concerns about the poor quality of representation being provided by some unqualified immigration consultants who are free to sell their services without any effective regulation (Frecker, Duquette, et al., 2002).

Staff programs for service delivery provide more scope for legal aid authorities to control and contain costs. To some extent, management can respond to increases in workload by demanding higher productivity from staff lawyers. However, there are finite limits to this response, beyond which quality of work becomes unacceptably compromised and staff morale collapses.

Staff offices also provide scope for some of the work to be done by supervised paralegal support staff, who are paid at lower rates than lawyers. The RLO, the ILRC and neighbourhood legal clinics that have been operating in Ontario have all made effective use of supervised paralegals (community legal workers) to provide ancillary services. These include the capacity to interview clients in their native languages and to provide basic translation services in multiple foreign languages. Community legal workers employed by staff offices also assist clients to prepare for their refugee hearing, including drafting personal information forms (PIFs), and they occasionally represent claimants at hearings. As well, they help clients with matters such as housing and social benefits, which are not directly related to their refugee claims.

The main risks that have been identified with respect to staff-based legal aid programs are limitation on clients' right to choose counsel, low productivity resulting from the absence of economic incentives to take on additional work, and concern that quality will be compromised as management increases the workload of individual staff lawyers beyond reasonable limits in an effort to contain costs. There is also concern that administrative overhead tends to increase in staff offices that are not subject to competitive market forces and that legal aid programs become more vulnerable to a withdrawal of services if staff have a monopoly over service delivery.

2.5.2 Delivery of legal aid through judicare

In five of the six provinces where immigration and refugee legal aid is available, it is delivered under some variant of judicare [18]. Individual clients who are eligible for legal aid are given a certificate by the legal aid authority. This enables the clients to retain a lawyer in private practice. The legal aid authority then pays the lawyer for services rendered in accordance with an established tariff.

There are three main variants in the way in which Canadian legal aid authorities pay for services within the judicare model of service delivery. Theses are:

  1. fee for service, paid on an hourly rate;
  2. a flat rate paid for particular services; and
  3. competitive tendering for contracted services on blocks of cases.

A fourth variant, licensing or franchising lawyers or law firms in a specific market area, giving them exclusive right to represent legal aid clients in that market on terms set out in the franchise agreement, is being used in England and Wales, but it has not yet been adopted by any legal aid authority in Canada.

Different tariff structures produce different economic incentives for lawyers who provide legal aid services. Assuming lawyers are rational economic actors, they will naturally attempt to maximize the income they earn from the services they provide. The effort expended on legal aid cases will tend to vary to the extent that lawyers have other paying work available from private clients. Those who have no other source of income will tend to maximize their legal aid billings, while those who have more remunerative work available will tend to limit the work they do for legal aid clients (Bevan, 1996; Stewart, 1997). The role that economic incentives to lawyers play with respect to legal aid costs is examined more closely in section 1.5.3 below. Fee for service - hourly rates and flat rates

The most common variant within the judicare model is to pay lawyers in private practice for services provided to legal aid clients at rates specified in an established tariff. Tariffs may specify hourly rates that will be paid, and they may place limits on the number of hours that will be allowed for particular services (e.g. for case preparation, drafting of applications, or attendance at court on uncontested motions). They may also prescribe flat fees for certain services as an alternative to placing a cap on the number of hours allowed. The immigration and refugee legal aid tariffs in Ontario, British Columbia and Alberta are primarily based on hourly rates, with prescribed time limits for certain services. The Manitoba and Quebec tariffs are based more on flat fees for specific services, with amounts provided under the Quebec tariff being significantly lower than in other provinces. Ontario and British Columbia pay the prescribed hourly rate for actual time spent in attendance at most hearings but limit the hours allowed for preparatory work. The Alberta tariff prescribes overall time limits for different types of cases. These limits cover total time spent on preparation and attendance at hearings.

Economists hypothesize that lawyers working for a prescribed hourly rate, with no limit on the time they can spend on a matter, will tend to maximize the hours worked unless they have more remunerative opportunities to earn income from other sources. If a cap is placed on the number of hours that can be spent on any given task, it is hypothesized that lawyers will tend to work to that limit and to bill accordingly. When services are paid for on a flat fee basis, lawyers will tend to maximize their incomes by increasing the number of occasions that they perform the best paid tasks and by minimizing the time spent performing each individual task (Stewart, 1997: 598). These economic incentives make fee-for-service judicare arrangements vulnerable to what economists describe as "supplier-induced demand", that is, provision of services initiated by the supplier, beyond what the person paying for the services had intended to buy. This issue is examined in more detail in section 1.5.3 below. Block contracts

As an alternative to paying private practice lawyers for each individual case according to an established tariff, some legal aid authorities have had law firms bid competitively for blocks of cases, or they have contracted with firms to handle a specified number of cases of a particular type at an agreed total cost. This arrangement has the effect of transferring the risk of cost overruns to the law firms that are contracted to do the work. By spreading the risk over a block of cases, the firms are able to offset gains from easy cases against losses they might incur on difficult cases.

Provided there is reasonable competition among lawyers seeking to do this work, block contracting enables legal aid authorities to obtain legal services at a reasonable price. In the competitive bidding process, there is risk that some firms may initially underbid in order to secure the legal aid and to discourage competition. If other firms find that the return they can receive from the block contracts is less than they can earn from regular paying clients, they will stop bidding for legal aid work. As competition for contracts is reduced, legal aid authorities become more vulnerable to overpricing of services by the few firms that remain willing to work on block contracts (Goriely, 1997: 203 citing Houlden & Balkin, 1985, and Spangenberg, 1990). If the competition pushes prices unreasonably low, there is also a risk that quality of service may be compromised (Goriely, 1997: 202-204).

Manitoba has successfully used block contracting to induce lawyers to provide legal services in communities where there were insufficient lawyers willing to represent legal aid clients. Block contracts have also been used by Legal Aid Manitoba to deal with family law cases and cases under the Young Offenders Act. According to the Executive Director of Legal Aid Manitoba, experience with block contracting in Manitoba has been satisfactory. Not only did this result in improved service delivery, but it also reduced costs (Fineblit, 1997: 78-80). Fineblit suggests that lawyers may be willing to work on block contracts at a low price because of long-term benefits such work produces in building a client base. The desire to obtain repeat business from clients serves as an incentive to maintain high quality of service.

Other writers on block contracting have emphasized the need to invest substantially in quality assurance monitoring to guard against erosion in quality of service as lawyers bid prices down in order to obtain business through block contracts (Stewart, 1997: 603; Goriely, 1997: 205). From the available literature on block contracting, it is unclear whether this mode of payment provides significant cost savings after one factors in the overhead cost of adequate monitoring to ensure that quality of service does not suffer.

Experience with block contracting for immigration and refugee legal aid services in Canada has been very limited. In the summer of 1999, four boatloads of illegal migrants were apprehended off the coast of British Columbia. Of this group, approximately 600 claimed refugee status. Federal immigration officials decided to detain the majority of them pending determination of their claims because there was reason to believe that many of them would fail to attend their refugee status determination hearing or to present themselves for removal from Canada in the event that their claims were rejected. Most of the claimants were detained at facilities remote from Vancouver, at locations where no experienced immigration lawyers were available to represent them. To cope with these unique circumstances the Legal Services Society in British Columbia invited lawyers from across the province to bid a fixed amount for blocks of these cases.

Many immigration lawyers in British Columbia publicly criticized the block bidding arrangement, claiming that the contracts were awarded to lawyers who bid unrealistically low and who then provided poor quality representation since they could not afford to devote the time required for each individual case. As a result of this pressure, block bidding has not been used by the Legal Services Society in British Columbia for any subsequent cases. The circumstances surrounding the marine arrival cases in 1999 were unique. First, the claims clustered around a limited number of scenarios of alleged persecution [19]. Individual claimants presented a limited number of very similar stories, making it possible to utilize the same research materials to prepare for a large number of similar claims. Second, for counsel who had to travel to the remote detention centres for hearings, it was more economical to spread the travel cost over a large number of individual cases. Third, in an effort to get through these cases quickly, the IRB committed special resources to the project and scheduled hearings to be concluded in sequence with minimum adjournments. This arrangement was very conducive to block booking of cases on which a single counsel would be representing the different claimants. This unique convergence of factors favourable to block contracting has not recurred.

Experience with the block contracting for the marine arrival cases was mixed. From the IRB's perspective, scheduling of hearings was far more efficient. Staff had to schedule a limited number of lawyers who traveled to the detention venues for extended periods to deal with their particular block of cases. Also, a new hearing could commence as soon as the previous one was completed, or could be brought forward on short notice if another hearing had to be adjourned (Richard Jackson, personal communication, March 21, 2002). Information on cost per case for the cases dealt with under these block contracts is not available. Given the fact that these cases involved unusual expenses for travel to the centres where the claimants were detained, it would be difficult to compare costs with other immigration and refugee cases in any event[20].

Block contracting of immigration and refugee cases does appear to offer some scope for improved efficiency in case management. To the extent that block contracts might enable counsel to concentrate on similar cases, and thereby to realize greater efficiencies in case preparation, they may also serve to reduce the overall cost of providing representation services. However, concerns about possible erosion of quality of service and limitation of clients' choice of representative need to be addressed. Franchising

A further variant within the judicare model is for legal aid authorities to license or franchise a limited number of lawyers or firms to do all legal aid work in particular markets. To qualify for this work, the individual lawyers or firms must meet service and quality assurance standards set by the legal aid authority. Rates paid for services may be fixed by tariff or set through a competitive bidding process, but only lawyers and firms that have been licensed by the legal aid authority are allowed to work on legal aid cases[21].

In markets where legal aid work constitutes a significant portion of total available billings, there can be significant advantages to franchised lawyers and firms. The legal aid authority can use this arrangement to control the number of lawyers in an area that will be doing legal aid work, thus ensuring reasonable income certainty for the lawyers concerned and sufficient competition to keep the cost of legal services at an acceptable level. The legal aid authority retains the power to control the number of lawyers approved to do legal aid work and the power to withdraw a franchise if work is not performed at an acceptable standard. This gives the legal aid authority greater capacity for quality assurance than exists in an open judicare system where any lawyer who wants to can accept work from legal aid clients. This option is being used extensively by legal aid authorities in England and Wales (Legal Aid Board, 2000: 35-37; Smith, 1997: 171-175).

Franchising programs in England and Wales appear to be more focused on quality assurance than on controlling the number of suppliers who are franchised to provide legal services. Franchising was initially conceived as being limited to provision of legal advice, but it has subsequently been extended to include provision of representation services (Smith, 1997: 171). Law firms and not-for-profit organizations, such as community legal clinics, can apply for franchises in particular subject areas. They are required to meet standards specified by the Legal Aid Franchise Quality Assurance Standard (Legal Aid Board, 2000: 37). This standard focuses primarily on general management and organization of the firm or agency seeking a franchise (supervision, file management, training, recording systems, etc.). Applicants for franchises and franchisees are also subject to audit on the quality of work submitted by the firm or agency to the Legal Aid Board (legal aid applications, bills, etc.), and quality of work done for clients.

The supposed advantages of franchising arrangements will only be realized if the legal aid authority makes an adequate effort to monitor the work done and to ensure compliance with the established service and quality standards. The required monitoring constitutes a significant administrative burden for legal aid authorities. It is also essential that the factors against which performance and capacity are assessed can be reasonably measured.

The fusion of franchising as purely a quality assurance mechanism and as a device to limit the number of approved suppliers in the market results from a combination of the basic franchising concept with variants of the block contracting model. The benefits of this hybrid model are also dependent on there being a reasonable level of competition among lawyers so the legal aid authority has a choice over whom to license and so franchised lawyers and firms stand to derive some economic benefit from the arrangement.

There has been no experience to date with the franchising option as a mode for delivery of immigration and refugee legal aid in Canada. The on-going quality assurance component of the franchising arrangement distinguishes it from other judicare funding arrangements in which legal aid authorities play a generally more passive role, relying on the governing body for the legal profession to enforce quality standards.

A form of franchising may be particularly well adapted for delivery of legal aid to immigrants and refugee claimants in Canada. Most private practice lawyers who work in the area of refugee law work as sole practitioners or in small firms. Many of them have relatively specialized practices, sometimes extending to criminal law, family law, and other areas of practice before administrative tribunals, but with heavy emphasis on immigration-related matters. This area of practice is relatively marginalized within the legal profession, with Law Societies showing little inclination to address complaints about quality of work done by lawyers in relation to practice before the IRB. There are many dedicated and competent lawyers who practice in this area, but there are also some whose work is of sub-standard quality[22]. Some sort of franchising, that would be designed to reward those who provide high-quality representation, might serve as a way to address these problems.

Australian experience with tendering for duty counsel services in the area of criminal law, in an arrangement that appears to be similar to franchising arrangements used in Britain, has led to the formation of consortiums of small firms and sole practitioners who share work and cross-refer cases. This has led to improved delivery of duty counsel services as the consortiums have taken on responsibility for ensuring that services are delivered in accordance with pre-established standards [Legal Aid Office (Queensland)].

At present, duty counsel services for immigrants and refugee claimants in Canada are extremely limited. The Legal Services Society in British Columbia provides funding for duty counsel to deal with detention cases, and there have been suggestions that the RLO might expand its services to provide duty counsel coverage for detention cases in Toronto. Beyond that, some NGOs provide advice and assistance to detainees, but there are no other established duty counsel services. Consortiums in the area of immigration and refugee legal aid practice could be used to improve delivery of service for persons detained by immigration authorities and to assist immigrants and refugee claimants when they first seek advice as to how they should proceed.

Such consortiums might also enable groups of lawyers to share common services, such as paralegals trained to deal with the special needs of immigrant and refugee clients, which individual lawyers can not afford on their own.

Given the limited experience with franchising or restrictive licensing in the legal aid context, it is difficult to assess what effect such arrangements might have on legal aid costs. One can assume that lawyers who are franchised as exclusive providers of immigration and refugee legal aid services would seek to maximize the return they could receive from the franchise. Depending on the arrangements under which they would be paid, they could be expected to maximize the hours billed on any given file or to maximize the number of tasks done for a flat fee. To maintain an appropriate level of competition to modulate price pressures, legal aid authorities would have to ensure that the number of lawyers being franchised is periodically adjusted to match fluctuations in total caseload.

2.5.3 The problem of agency cost

In economic theory, when any person (referred to as a "principal") relies on someone else (referred to as an "agent") to deliver a service, there is a risk that the agent may provide less than the principal expects for a given price. Or the agent may charge more than the principal intended to pay for the service provided. This difference in the value of what the service is worth to the principal and the amount paid to the agent is referred to by economists as an "agency cost". The problem of agency cost arises when the agent and the principal do not share the same information or objectives regarding whatever it is the principal expects (Bevan, 1996:101, citing Milgrom and Roberts, 1992). That is to say, the agent will take advantage of the information asymmetry to satisfy objectives of the agent that are not shared by the principal.

This problem has been studied extensively in economic literature dealing with the provision of medical services where patients rely heavily on physicians to determine what level of treatment is appropriate. The hypothesis is that over and above physicians' incentive to provide appropriate medical care, they also have an incentive to maximize their own incomes. Patients rely almost completely on physicians to identify what is the most appropriate treatment, and there is wide latitude as to what is the most appropriate treatment in individual cases. In these circumstances, there is risk, at least in theory, that physicians, when choosing between relatively equivalent options, will favour options that maximize their income over options that minimize cost to the patient. Economists refer to this phenomenon as "supplier-induced demand", which is a type of agency cost.

The central problem with respect to supplier-induced demand for professional services is that the impetus for services comes from the service provider and not from the client. Because of his or her informational advantage, the professional adviser is in a position to influence what services, and the amount of services, the client would like to use (Stewart, 1997: 593). This problem is compounded when dealing with services that are being paid for by a third party who is remote from the services being provided by the agent. In these circumstances, the consumer of the services loses interest in the cost of the services being supplied (e.g. when an insurance company is paying for car repairs). Economists refer to this as "moral hazard" inherent in insured transactions (Bevan, 1996:102, citing Milgrom and Roberts, 1992).

Bevan (1996) and Stewart (1997) have examined the extent to which legal aid programs may be subject to agency costs of the sort described above. In the legal aid context, there is a complex three-way relationship between the legal aid client, the legal aid authority and the lawyer providing legal services. The client, as a consumer of services for which he or she is not paying, has an incentive to seek the best possible level of service without regard to the cost. The legal aid authority, which is paying for these services, has an incentive to contain costs so it will be able to provide services to more clients. The lawyer has a professional duty to deliver the best quality of representation possible within the budget that the legal aid authority is prepared to pay. At the same time, the lawyer has an incentive to maximize his or her own income from the transaction.

Given the privileged nature of the solicitor-client relationship, it is difficult for the legal aid authority to assess whether the services provided by the lawyer are the most cost-effective way to deal with the case. The choice of how best to present the client's case is rarely clear-cut. The client relies heavily on the lawyer to define what level of service is required. For different reasons the lawyer's interests and the client's interests converge toward maximizing expenditures on the client's behalf. However, this is directly contrary to the legal aid authority's objective to contain the cost of representation.

According to Bevan (1996: 100), at the heart of economic analysis of the provision of both legal and medical services is the problem that public financing of professional services creates the potential for supplier-induced demand. While this phenomenon is easy to articulate in theoretical terms, it is extremely difficult to measure. Although the literature is extensive, there is on-going debate over the extent to which supplier-induced demand is a factor in rising health care costs.

Bevan hypothesizes that lawyers seek to manage their work to secure a target income. According to his hypothesis, the target income is likely to be the same as, or an increase on, past income measured in "real terms". Bevan concluded that this hypothesis was largely, though not completely, borne out in his analysis of changes in the portion of solicitors fees earned from legal aid in England and Wales between 1990-91 and 1993-94.

Stewart identifies two other factors that are relevant to the analysis of agency costs in the legal aid context. First, established legal aid tariffs weaken the normal market forces that would normally push the cost of services down when there is excess supply (Stewart, 1997: 592). The price fixed by the tariff does not decline in the face of increased competition for work. Second, there are inherent difficulties in monitoring the quality of legal work, particularly when the legal aid authority that is paying is remote from dealings between the lawyer and his or her client. As a result, there is a risk that lawyers may provide services of a lower quality than the legal aid authority expects for the money being paid (Stewart, 1997: 592-593).

Stewart points out that the judicare model for delivering legal aid services is vulnerable to supplier-induced demand in two ways. Where the supply of lawyers exceeds the demand from private clients, lawyers will be more inclined to encourage clients to apply for legal aid. They will also be more inclined to encourage the legal aid authority to fund whatever steps are recommended on legal grounds (Stewart, 1997: 598). This problem is most acute where the tariff pays lawyers on an hourly rate. Assuming that lawyers are rational economic actors, the incentive for them to work additional hours is diminished when they are paid block fees.

In systems where the tariff places a cap on the number of hours that lawyers can spend on each type of case or on the component parts of each case, there is an incentive to work the maximum number of hours and no more. To the extent that lawyers are expected to work beyond the cap without being paid, quality becomes a concern (Stewart, 1997: 599).

This tendency toward supplier-induced demand and deterioration in quality of service may be inherent in the incentive structures that exist in the complex three-way relationship among the legal aid authority, counsel and legal aid clients. In the absence of effective quality assurance monitoring by the legal aid authority, the professionalism of counsel and their ethical commitment to deliver high quality legal services are the main check against this risk.

As a practical matter, most legal aid plans are built on mixed models of service delivery. Legal aid authorities are experimenting with all of the options discussed above. Suffice it to say for present purposes, that the relative balance among the different modes of service delivery, particularly as between the staff model on one hand and different variants of judicare on the other, give rise to a variety of economic incentives that lead lawyers to conduct themselves in ways that influence legal aid program costs.

All of the economic incentives discussed above are at play with respect to immigration and refugee legal aid to the same extent as they are at play in other areas of legal aid.

Date modified: